Why should I pay TCS for buying foreign currency, travel cards and sending money abroad?
The number of people flying abroad affects the amount of cash being transferred to foreign bank accounts and vice-versa directly. With the numbers increasing every day, rules are being drawn to avoid any financial mishap in the forex sector. One such rule imposed by the Government of India is the TCS.
Under the LRS, Indian citizens can send money abroad up to USD 250,000 per year for medical treatment, gifts, upkeep of family overseas, foreign education, and real estate, stock, and bond investments. Budget 2020 imposed a 5% tax collected at source (TCS) on all remittances above 7 lakh INR made under the RBI’s Liberalized Remittance Scheme (LRS) for a financial year. And if it is for an educational purpose, a tax of 0.5% will be deducted, but it should be a loan started from an authorized loan lender.
When you transfer an amount of 10 lakh INR, the TCS will be applied on the 3 lakh INR barring the 7 Lakh INR from the total amount. Even if you do two separate transfers of 5 each. TCS will be deducted for the 3 lakhs INR in your second transaction.
This TCS is deducted when you buy foreign currency or travel cards and when you do international money transfers through wire transfer and demand draft.
So, will you get that money back? If you had filed the income tax already for the transferring amount, you can avail money back just like the way you avail it for the money deducted from your income when you file the income tax return.